THE RELATIONSHIP BETWEEN TAXATION, CONSUMER SPENDING, AND ECONOMIC GROWTH

Abstract

Taxation is an important source of government revenue, but it can also influence household consumption, saving behavior, investment, and economic growth. This study examined the relationship between taxation, consumer spending, and perceived economic growth, with particular emphasis on disposable income, saving behavior, tax administration, revenue utilization, and household income differences. A quantitative cross-sectional design was adopted using a structured five-point Likert-scale questionnaire. Data were collected from 400 valid respondents and analyzed using descriptive statistics, reliability analysis, correlation, multiple regression, and one-way ANOVA. The findings showed that taxation was significantly associated with reduced consumer spending and saving behavior. Regression analysis further indicated that taxation negatively predicted consumer spending, while revenue utilization and investment were important positive predictors of perceived economic growth. Significant differences were also observed among household income groups, with lower-income respondents reporting stronger effects of taxation on their spending and saving behavior. Overall, the findings suggest that taxation may place pressure on household purchasing power and savings, while its broader contribution to economic growth depends largely on how effectively and productively tax revenues are utilized. The study highlights the need for balanced taxation, improved transparency and tax administration, protection of household purchasing power, and greater allocation of public revenues toward productive investment and essential services